321-340

In the long run, fiscal policy primarily affects a. aggregate demand. In the short run, it affects primarily aggregate supply. b. aggregate supply. In the short run, it affects primarily saving, investment, and growth. c. saving, investment, and growth. In the short run, it affects primarily aggregate demand. d. saving, investment, and growth. In the short run, it affects primarily aggregate supply.

c

Other things the same, automatic stabilizers tend to a. raise expenditures during expansions and recessions. b. lower expenditures during expansions and recessions. c. raise expenditures during recessions and lower expenditures during expansions. d. raise expenditures during expansions and lower expenditures during recessions.

c

The aggregate demand and aggregate supply graph has : a. the price level on the horizontal axis. The price level can be measured by the GDP deflator. b. the price level on the horizontal axis. The price level can be measured by real GDP. c. the price level on the vertical axis. The price level can be measured by the GDP deflator. d. the price level on the vertical axis. The price level can be measured by GDP.

c

A reduction in U.S net exports would shift U.S. aggregate demand a. rightward. In an attempt to stabilize the economy, the government could raise taxes. b. rightward. In an attempt to stabilize the economy, the government could cut taxes. c. leftward. In an attempt to stabilize the economy, the government could raise taxes. d. leftward. In an attempt to stabilize the economy, the government could cut taxes.

d

During periods of expansion, automatic stabilizers cause government expenditures: a. and taxes to fall. b. and taxes to rise. c. to rise and taxes to fall. d. to fall and taxes to rise.

d

People are likely to want to hold more money if the interest rate a. increases, making the opportunity cost of holding money rise. b. increases, making the opportunity cost of holding money fall. c. decreases, making the opportunity cost of holding money rise. d. decreases, making the opportunity cost of holding money fall.

d

Suppose there were a large increase in net exports. If the Fed wanted to stabilize output, it could a. buy bonds to increase the money supply. b. buy bonds to decrease the money supply. c. sell bonds to increase the money supply. d. sell bonds to decrease the money supply.

d

The theory of liquidity preference assumes that the nominal supply of money is determined by the a. level of real output only. b. interest rate only. c. level of real output and by the interest rate. d. Federal Reserve.

d

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve? a. As the money supply increases, the interest rate falls, so spending rises. b. As the money supply increases, the interest rate rises, so spending falls. c. As the price level increases, the interest rate falls, so spending rises. d. As the price level increases, the interest rate rises, so spending falls.

d

According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in a. the price level. b. the interest rate. c. the exchange rate. d. real wealth.

b

Assume the MPC is 0.75. Assuming only the multiplier effect matters, a decrease in government purchases of $100 billion will shift the aggregate demand curve to them a. (i) left by $200 billion. b. (ii) left by $400 billion. c. (iii) right by $800 billion. d. None of (i), (ii), and (iii) is correct.

b

Recessions in China and India would cause a. the U.S. price level and real GDP to rise. b. the U.S. price level and real GDP to fall. c. the U.S. price level to rise and real GDP to fall. d. the U.S. price level to fall and real GDP to rise.

b

The aggregate quantity of goods and service demanded changes as the price level falls because a. real wealth rises, interest rates rise, and the dollar appreciates. b. real wealth rises, interest rates fall, and the dollar depreciates. c. real wealth falls, interest rates rise, and the dollar appreciates. d. real wealth falls, interest rates fall, and the dollar depreciates.

b

The classical dichotomy and monetary neutrality are represented graphically by: a. an upward-sloping long-run aggregate-supply curve. b. a vertical long-run aggregate-supply curve. c. an upward-sloping short-run aggregate-curve. d. a downward-sloping aggregate-demand curve.

b

Which of the following will both make people spend more? a. wealth and interest rates rise. b. wealth rises and interest rates fall. c. wealth falls and interest rates rise. d. wealth falls and interest rates fall.

b

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds, a. the dollar would appreciate which would cause aggregate demand to shift right. b. the dollar would appreciate which would cause aggregate demand to shift left. c. the dollar would depreciate which would cause aggregate demand to shift right. d. the dollar would depreciate which would cause aggregate demand to shift left.

c

In the long run, changes in the money supply affect a. (i) prices. b. (ii) output. c. (iii) unemployment rates. d. All of (i), (ii), and (iii).

a

Permanent tax cuts shift the AD curve a. farther to the right than do temporary tax cuts. b. not as far to the right as do temporary tax cuts. c. farther to the left than do temporary tax cuts. d. not as far to the left as do temporary tax cuts.

a

Using the liquidity-preference model, when the Federal Reserve increases the money supply a. the equilibrium interest rate decreases. b. the aggregate-demand curve shifts to the left. c. the quantity of goods and services demanded is unchanged for a given price level. d. the long-run aggregate-supply curve shifts to the right.

a

Which of the following can explain the upward slope of the short-run aggregate supply curve? a. nominal wages are slow to adjust to changing economic conditions b. as the price level falls, the exchange rate falls c. an increase in the money supply lowers the interest rate d. an increase in the interest rate increases investment spending

a